Ja­pan sells 10-year bonds at neg­a­tive yield for the first time

The Pak Banker - - 6BUSINESS -

TOKYO: The Ja­panese govern­ment got paid to bor­row money for a decade for the first time, sell­ing 2.2 tril­lion yen ($19.5 bil­lion) of the debt at an av­er­age yield of mi­nus 0.024 per­cent on Tues­day. The sale drew bids for 3.2 times the amount of the se­cu­ri­ties of­fered, the first in­crease in de­mand since an auc­tion in De­cem­ber, ac­cord­ing to the Fi­nance Min­istry. Ja­panese govern­ment bonds of as long as five years in ma­tu­rity sold at an av­er­age yield below zero for the first time last month, af­ter the Bank of Ja­pan pushed yields lower across the curve with the an­nounce­ment of neg­a­tive in­ter­est rates Jan. 29.

De­mand at 10-year note auc­tions had been de­clin­ing this year as yields con­tin­ued their slide, even with the cen­tral bank hav­ing the scope to buy ev­ery new bond is­sued as part of its stim­u­lus pro­gram. The pre­vi­ous bench­mark note was yield­ing mi­nus 0.07 per­cent. An auc­tion of 0.3 per­cent 10-year pa­per on Feb. 2 had a then record-low av­er­age yield of 0.078 per­cent.

"De­mand was stronger than ex­pected," said Shuichi Oh­saki, chief rates strate­gist at Bank of Amer­ica Mer­rill Lynch. "The out­come sug­gests there is am­ple de­mand be­fore re­demp­tion of ex­ist­ing bonds in March."

The bench­mark 10-year bond yield dropped as low as mi­nus 0.075 per­cent af­ter the auc­tion, match­ing a record. Yields on 20year debt sank to an un­prece­dented 0.46 per­cent, while those on 30-year se­cu­ri­ties de­clined to an all-time low of 0.765 per­cent.

Volatil­ity in the world's se­cond-big­gest sov­er­eign bond mar­ket spiked to the high­est since June 2013 last month, ac­cord­ing to the S&P/JPX JGB VIX. A BOJ sur­vey of bond mar­ket par­tic­i­pants be­tween Feb. 8 and Feb. 16 showed 69 per­cent of re­spon­dents said mar­ket func­tion­ing has de­creased from three months ago.

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